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URL:  http://boards.fool.com/im-planning-for-a-year-from-now-and-we-have-30668864.aspx

Subject:  Re: New here! Have questions! Date:  5/5/2013  4:49 PM
Author:  aj485 Number:  306961 of 308542

im planning for a year from now. and we have enough equity that i think our bank will be agreeable. we wouldnt buy anything, to start, that cost more than the equity in our primary residence. just want to start out small.

You are planning on borrowing against equity in your primary residence to buy investment property? THUNK!

Please realize, even if you improve your credit scores significantly - you are unlikely to be able to borrow more than 80% of the value of your home - there are very few lenders who are willing to provide equity loans at more than a combined LTV of 80% at all, and then only to people with stellar credit, which, with a 2.5 year old BK on your credit, you will not have for at least 4.5 years, and possibly 7.5 years, depending on the circumstances of your BK.

just want to start out small. how many months do you consider to be adequate for a cushion?

For emergency funds - a minimum of 6 months of your monthly budgeted expenses, plus 6 months of the expected monthly expenses for the investment property (12 months would be better). Then, you will need to save (not borrow) the down payment for the investment property, which is probably at least 25%, and maybe 30% of the value of the investment property, plus money for any repairs/updates you want to make to the property.


AJ
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